Do you have a UCC lien filing, or know the number of liens filed, on your company? I talk to a lot of business owners that have no idea they have liens filed against their company’s assets with the Secretary of State. If your company is organized in multiple states then you could have liens filed in all states or filed in one state but not the others. It’s important to know who has a UCC lien filing on your business when applying for a new loan.

What is a UCC filing:

According to Investopedia, “A UCC-Uniform Commercial Code-1 statement is a legal notice filed by creditors to publicly declare their rights to potentially obtain the personal properties of debtors who default on business loans they extend. Often abbreviated as UCC-1, these notices are typically printed in local newspapers to alert the masses of the creditors’ intentions. UCC-1s are required for all business loans under the Uniform Commercial Code (UCC) and establish a relative priority over which specific assets may be seized, and in what order, while solidifying the collection pecking order in cases where there are multiple lenders to the same debtor.”

Business owners need to be careful when completing financing applications to make sure that they are not authorizing the lender to file a UCC-1 Financing Statement when they apply for a loan. Lenders should not file a lien until the loan documents have been executed, but prior to funds being dispersed.

Why you have a UCC filing on your business:

Every lender wants to be first in line to seize assets should the company default on their loan. Legal right to seize assets is prioritized by the date filed. This means the first lender to file their UCC lien has first rights to seize and liquidate assets before the second lender. Once the debt of the first lender is satisfied, any remaining assets can be liquidated to satisfy the debt of the second lender, and so on. Liens usually expire in five or ten years but you can request a UCC-3 termination if you never had a loan with that lender, or the loan has been paid off, or settled in court in the event of default.

How to find any UCC filings on your business:

Most states offer a free UCC lien search at the Secretary of State’s website. Some states charge a fee for you to get a list of liens on your company. To search for any liens on your company, type your state and “UCC search” into your favorite search engine. If your company is organized in Virginia for instance you would type “va ucc search” then follow the instructions on the website.

How to request UCC filings to be removed:

Some lenders file the UCC-1 under their own name while others will use a third-party service. When you review a financing statement look at Section 3. “Secured Party’s Name” and if it states “as representative” then you have a third-party filing. To find out which lender has filed the lien and to request a termination you need to send an email or call the third-party and they will have the actual lender contact you. The email and phone number to contact the third-party filing agent is usually in the upper left corner.

We are always happy to assist our clients with UCC lien search and removal. You can fill out the form on the Homepage,  book some time on my calendar, or just give me a call at (843) 790-3661.